Psychotic disorders, which include schizophrenia and bipolar disorder, affect ~3% of veterans but impose higher social and economic costs than other mental illnesses due to their severity. These costs are associated with not just care of the affected individuals, but also with the effects on their families and society. Therefore, improved treatment of veterans with psychosis is an important goal. However, there have been no major advances in treatments for psychosis in decades. Improved understanding of the pathophysiology of psychosis would advance the search for new treatments and improve the care of veterans with this debilitating condition. Electroencephalographic (EEG) studies of SZ and BP have repeatedly demonstrated decreases in various types of sensory- and task-evoked responses. However, recent evidence has demonstrated that conversely, SZ is associated with increased spontaneous (non-event locked) brain activity. In the EEG, increased power of low-frequency activity (LFA; delta [1-4 Hz] and theta [4-8 Hz]) during the resting state has been observed for many years in SZ and BP, and has recently been corroborated with modern signal processing methods. New findings suggest that spontaneous gamma activity (SGA) (30?100 Hz) is increased in SZ during awake sensory stimulation and is associated with psychotic symptoms. In addition, functional neuroimaging studies have found increased resting state and baseline activity and connectivity. Taking these findings into account, we hypothesize that SZ and psychotic BP are characterized by increased LFA at rest, and increased SGA during awake stimulus processing. While evoked activity deficits in SZ and BP have been studied for decades, the nature of spontaneous brain activity in these disorders has been relatively neglected until recently. Since most of the activity of the brain is spontaneous, not phase-locked to some external event, a better understanding of spontaneous brain activity in psychosis is needed. Therefore, the overall goal of this project is to elucidate the neural mechanisms of spontaneous neural activity abnormalities in psychosis with EEG. We will compare SZ with BP to reveal whether these abnormalities are associated with one or the other disorder, and we will compare SZ and psychotic BP with non-psychotic BP to elucidate whether these abnormalities are specifically associated with psychosis. We will use high-density EEG recordings to localize the neural generators of brain oscillations in veterans with SZ, psychotic BP, non-psychotic BP, and healthy control subjects. Our aims are: Aim 1: Are increased SGA and resting LFA present in BP, and are they specific to psychosis? We will test the hypothesis that increased SGA during auditory steady-state stimulation and increased LFA during rest are specific to psychosis, and so will be present in SZ and psychotic BP but not non-psychotic BP. Aim 2: What cortical regions are associated with increased SGA in psychosis? We hypothesize that sensory stimulation results in increased SGA in the associated sensory cortex as well as a modality- independent region of the prefrontal cortex. We will examine whether SGA is increased in the visual cortex and prefrontal cortex during visual steady-state stimulation in SZ and psychotic BP. Aim 3: What are the effects of arousal/alertness on increased SGA in psychosis? We hypothesize that increased SGA is dependent upon state of arousal or alertness. We will compare SGA during rest, passive stimulation, and active discrimination of auditory and visual steady-state stimuli. Aim 4: Characterize the state/trait and dimensional aspects of the relationships between SGA/LFA and psychosis. We will determine whether SGA and LFA are more closely related to current or historical psychosis, and characterize the relationship between SGA/LFA and psychosis irrespective of diagnosis. The results of these studies will furnish new insights into the pathophysiology of psychotic disorders, and hopefully help advance the development of treatments to improve the lives of veterans with psychosis.